Cash-Flow Lending: An Optimal Financing Solution for Many Businesses

Non-bank lenders like US Capital Partners are increasingly offering new creative financing options for small and lower middle market businesses. One of these is cash-flow lending.

Strong Demand for Business Financing in the Coming Six Months

The demand for financing among small and lower middle market businesses remains high. According to a report published this month by Pepperdine University, 31% of businesses with annual revenues of $5–100 million are planning to increase financing in the next six months. Among them, 61% aim to finance planned future growth or expansion, including acquisitions; 56% are looking to fund increased demand; 55% need to cover expected working capital fluctuations; and 35% want to refinance existing loans or equity.

The Rise of Cash-flow Lending

The report also states that 69% of all respondents consider it difficult to raise new external debt financing. What many of these businesses may not realize is that the financing options available to them have actually been steadily increasing. Non-bank lenders are increasingly providing financial products that offer new levels of flexibility. One of these is cash-flow lending, a form of financing in which a loan is backed by the company’s historical and projected cash flows.

When Is Cash-Flow Lending Extremely Useful?

Smaller businesses may not always have large inventories, receivables, or fixed assets, which makes it difficult for them to secure traditional asset-based financing. Nonetheless, these companies may have strong cash-flow margins and enterprise value. Typical examples include service companies and high-tech companies.

“These businesses may be in their early stages, and may not have many years of historical performance,” said Jeffrey Sweeney, CEO and Managing Director at US Capital Partners. “Traditional banks may therefore be hesitant to lend to them. However, non-bank lenders like US Capital Partners now provide cash-flow term loans to such businesses, even if they have less than $5 million in trailing EBITDA—which used to be the threshold for such loans.”

How US Capital Partners Can Help

US Capital Partners is a specialist in debt and equity financing for small and lower middle market companies. At US Capital Partners, companies with strong cash flows can expect cash-flow loans with: